A few years ago, Lauren Locker, a financial advisor in Little Falls, N.J., noticed unnerving changes in a long-time client’s behavior. Then 82, the woman had hired Locker when she was 64, and “In all those years, she could add numbers faster in her head than I could with a calculator,” says Locker, whose firm Locker Financial Services has about $45 million in assets. But the client seemed unable to add just about anything and was forgetting such information as where her grocery store was located.
Alarmed, Locker decided to reach out to the woman’s designated contacts—her adult children. She spoke to the offspring, who called a meeting in Locker’s office and convinced their mother to see a doctor. The diagnosis was bad—an inoperable brain tumor—but they were able to arrange and pay for the best care possible. “It couldn’t have gone any better than it did,” says Locker. “Everyone was involved and it was all about taking care of Mom.”
It’s a difficult, touchy and often heart-breaking challenge: how to handle aging clients who seem to be losing their mental acuity. The problem may be the result of dementia, another medical condition or just a normal consequence of aging. Whatever the cause, the issue poses special challenges for financial advisors. And as baby boomers age and lifespans increase, the problem will likely become more common.
But if advisors can learn to recognize telltale signs that something is off and take certain precautions ahead of time, it’s possible to address the problem in a caring and systematic way.
“Often it‘s the financial stuff where you see the first red flag,” says Austin Frye, who heads Frye Financial Center in Miami. Making the matter more difficult, clients may not be aware they’re losing their mental capacity. If they are, they may try to hide it. “They‘ll nod their head and say I understand, but they’re covering up,” says David Bailin, who heads Personal Wealth Strategies, a Hamilton, N.J., firm with about $50 million in assets.
Still, certain common behavior patterns tend to signal a problem—clients who call back repeatedly with the same question, clearly not remembering previous talks, for example, or clients who no longer understand financial statements. And there are less obvious indicators, according to Locker, such as forgetting about taking required minimum distribution requirements for retirement accounts.
Turning to Outside Help
One approach is to ask clients to sign a document indicating who to contact in cases where they would benefit from another person being part of the financial planning process. The idea isn’t to provide those designated people access to confidential financial information, but rather to give them a heads-up that something’s not quite right. “It allows us to start a conversation about what to do if something happened to them,” says Locker.
Locker always tries to ask the client first before contacting the designated person, but what happens after that depends on the situation. A client of hers recently seemed out of it, so Locker asked how she was doing. When the woman became almost belligerent, “I just backed off and contacted her daughter,” she says. Turned out the client had started a new medication that was making her act strangely.
Fact is, however, sometimes the children are the worst people to contact, especially if they’re eager to get their hands on their parents’ money. For that reason, Derek Holman, a managing director and co-founder of EP Wealth Advisors in Torrance, Calif., which manages about $1.7 billion, recommends forming a family trust with a trustee who isn’t necessarily a beneficiary, he says. “Otherwise, you aren’t always putting the financial interest of the client first.”
At the same time, clients should consult a lawyer and sign a power of attorney and healthcare directive—and to keep a copy in their file. Since brokerage firms tend to want specific language in such documents, especially in a power of attorney, you need to check back every few years to ensure the wording requirements haven’t changed.
If you don’t have such a document, then you‘ll need to get your client’s consent before contacting a family member or friend. Frye tends to go about it by asking permission to introduce himself to clients’ children, as well as their lawyer and accountant. “It’s easier for me to ask an accountant who has worked with a client for a while ‘Do you think this person is functioning well?’ than a family member,” says Frye.
About a year ago, for example, he noticed over multiple meetings that an aging client was acting unusual, rambling on the phone and forgetting conversations they’d had the day before. Frye first asked if he could call the client’s accountant. Based on that conversation, he then decided to seek permission to contact the man’s son in New York. The client agreed, and the son came down to visit, taking his father to see a mental health professional for evaluation.
Be Patient
In some cases, the solution may not be to get anyone else involved, but simply to exercise patience. Frye cites a long-time client who calls almost every day for help accessing his online account, even though Frye’s assistant previously wrote out the steps for him. When he calls, staff members simply re-explain the process. “I see a natural slowing down in decision-making, but he’s really OK,” says Frye.
What if there’s a spouse? At first glance, you’d think it would make the situation easier, but that’s not always the case. “Sometimes managing the spouse is the trickiest part,” says Bailin. Recently, for example, the husband in a retired couple was diagnosed with Alzheimer’s. He also had been the main financial decision-maker, and it was important to the wife he feel he was in charge for as long as possible. They decided to put a small portion of the couple’s holdings in a checking account, which the husband had access to, while the rest was segregated in other places.
